Digital mortgage to roll out by end of year to applicants refinancing variable, owner-occupied loans

The big bank is hoping to reinvigorate its troubled home lending business by launching a digital mortgage that approves customers in 10 minutes.

Westpac chief exectuive Peter King. Picture: Jane Dempster/The Australian.

Westpac is hoping to reinvigorate its troubled home lending business by launching a digital mortgage process, enabling customers to gain unconditional approval for a loan in 10 minutes.

While all the major banks are undertaking similar projects with varying timelines, chief executive Peter King said the Westpac digital mortgage would initially be offered in the final quarter of this year to sole applicants refinancing variable, owner-occupied loans through the bank’s website or banking app.

Customers will be required to have 20 per cent equity in the property and earn a PAYG income.

“Mortgages are our most important business, and going digital speeds up the whole process,” Mr King told The Australian. “We want to make it available to most of our flows.”

The mortgage initiative will be formally launched by Mr King in a market update on Wednesday which is expected to focus on digital banking and new features in the Westpac app.

The Westpac chief will also discuss various initiatives in response to the climate challenge.

Digital transformation holds the key to the bank slashing its annual cost base to $8bn and overhauling its business performance, particularly in mortgages.

After significant processing problems caused by the pandemic, growth in the bank’s mortgage portfolio is again in line with the wider banking system.

However, to keep pace with market leader Commonwealth Bank, Westpac and its rivals have been investing to automate processes which have been largely paper-based for decades.

The revised application and assessment process will draw on third-party data sources and use advanced analytics to perform credit checks, verify financial information and undertake property valuations.

As a result, the time from application to unconditional approval will be easier and faster, with no paperwork.

The head of consumer and business banking Chris de Bruin said customers wanted an easier way to refinance their home loans and greater certainty about the outcome of their application.

Historically, he said, refinancing took several days and involved multiple manual processes.

“From application through to unconditional home loan approval, customers are likely to experience much faster mortgage processing provided they meet the criteria,” Mr de Bruin said.

“While we are speeding up the home loan process, we are still performing the right checks and balances to ensure we are lending responsibly.

“Customers who do not meet our criteria for a digital loan or have more complex needs will have their applications assessed by a lender.”

CBA launched a digital home loan product, Unloan, in May, offering a low-cost interest rate and a customer loyalty discount growing by 0.01 per cent a year for up to 30 years.

Digital applications can be turned around in as little as 10 minutes, and the product is tailored for customers looking to refinance properties up to a value of $3m with a maximum loan-to-valuation ratio of 80 per cent.

ANZ, for its part, is banking on the addition of a mortgage product to its ANZ Plus platform in the 2023 financial year to halt the slide in recent years in its home lending market share.

The launch of Plus last March followed ANZ’s costly misreading of the housing boom and loss of significant share to CBA, National Australia Bank and Macquarie due to clunky, paper-based processes.

NAB announced its intention in May to build “Australia’s simplest home loan, with intervention by exception”. Chief executive Ross McEwan said the time taken to approve a loan in the retail business and the broker network had already halved.

In the retail business, the median “time to yes” was less than two days, and less than an hour in 35 per cent of cases. NAB said its three-stage overhaul, including settlement, would be finished in the 2024 financial year.